China’s Fertiliser Market Update

Approaching the end of 2024, the Chinese fertiliser market continues to show intriguing developments, reflecting the broader complexities of global supply chains and domestic production dynamics. Price fluctuations across nutrient categories and raw materials, political actions, including export bans and sanctions, have all contributed to high volatility in the markets.

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Phosphorus Markets

The yellow phosphorus market has softened, with prices decreasing slightly to USD 3,303/MT (down from USD 3,368/MT in early November, a 1.9% drop). This downtrend is driven by buyer reluctance to engage at current price levels, particularly as inventory remains high. Interestingly, supply-side constraints are beginning to emerge, with production pauses for environmental inspections and facility maintenance. Speculation about rising hydroelectric power costs in Sichuan and Yunnan - expected in November or December - may drive up production costs, potentially reversing the current price trend.

Phosphoric Acid, the market remains stable at USD 934/MT (was USD 927/MT in late October, up 0.8%), with consumption largely supported by the new energy sector. However, supply tightness persists due to environmental audits and reduced production in key regions like Sichuan. Despite this, factory output has seen slight growth in recent weeks, with reports of some producers resuming operations. I expect over the next months leading to Chinese New Year that Technical Monoammonium Phosphate prices continue to rise as a result.

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Nitrogen Fertilisers

China’s Urea market continues to experience downward price pressure as exports are currently banned and local demands are soft. The average domestic price is USD 259/MT (down from USD 275/MT in October, a 5.8% decline), with traded prices for Prilled Urea in Shandong ranging between USD 248-252/MT. FOB prices for Prilled Urea have also dropped to USD 264/MT (from USD 271.5/MT in late October, a 2.8% drop).

Despite the price drop, production remains robust, with a weekly output of 1,318 kt and daily volumes at 188 kt. Factory inventories have risen to 1,251 kt (up from 1,172 kt in late October, a 6.7% increase), suggesting a buildup of unsold stock. Port inventories, on the other hand, have increased marginally to 223 kt (was 219 kt, up 1.8%), highlighting cautious downstream buying and limited export opportunities. This cautious behaviour contrasts with reports of heightened seasonal demand west of Suez, highlighting conflicting market sentiment.

Ammonium Sulphate (Amsul) has seen contrasting regional dynamics. Prices have softened slightly to USD 140-143 FOB (down from USD 153-155 FOB in late October, an 8% drop), but demand remains robust in southern China, driven by NPK factories and rare earth mining applications in Myanmar. This divergence raises questions about how localised drivers shape broader market pricing.

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Potash and Phosphate Fertilizers

Potassium Chloride (KCl) prices in China remain relatively stable at USD 354/MT (was USD 336/MT in late October, up 5.4%), reflecting ongoing inventory pressures at ports. With winter reserves beginning to build, there’s potential for a price rebound in the coming months, though leading traders continue to withhold stock to stabilise market conditions.

The MAP/DAP market tells a nuanced story. Prices for 55% powdered MAP are currently at USD 435/MT (down from USD 495/MT in late October, a 12.1% drop), with granular MAP FOB prices holding steady at USD 495/MT. Rising raw material costs—particularly Sulphur, Liquid Ammonia, and Rock Phosphate—are pushing up production costs, even as downstream demand remains cautious. Environmental protection inspections and tight raw material supplies are further constraining market activity, hinting at potential supply chain bottlenecks. With the Ethiopian tender currently underway, there is difficulty not in price but in access as the large players in the market focus their production on the African continent.

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Freight and Exchange

To note the USD:CNY exchange rate remains relatively stable at 7.18, with minor fluctuations offering modest support for Chinese exporters. This consistency provides some relief amid an otherwise volatile global trade environment.

George Perkins, managing Waypoint’s Freight and Logistics posted a fantastic article looking at freight here. In summary:

Trans-Pacific Eastbound (TPEB) trade lanes, West Coast space is improving with additional capacity expected by late November, East and Gulf Coast routes are fully utilised. West Coast rates are stable, a General Rate Increase (GRI) is likely for the East Coast by December 1. Market pressures include ILA negotiations and potential tariff actions.

The Far East Westbound (FEWB) is tight on space due to blank sailings and roll pools, with rates projected to reach USD 6,000–6,200 by December. SCFI and NCFI indices dropped in Week 47 due to lower cargo volumes and oversupply, with Europe and Middle East route indices down 2.3% and 8.6%, respectively. Rates are expected to rise with December GRIs.

MSC announced new Freight All Kinds (FAK) rates effective December 1, 2024. West Mediterranean rates will increase to USD 4,450 for 20DV containers (from USD 3,650), and Black Sea rates will rise to USD 4,550 (from USD 3,800).

Bulk and break bulk side, the Baltic Dry Index (BDI) increased from 1,374 to 1,627 in November but remains 10% lower year-on-year. Forward Freight Agreements (FFAs) suggest stable rates through December, with a seasonal dip expected in Q1 2025. The market is forecasted to remain balanced in 2025, supported by low vessel deliveries.

Chipolbrok is adding two new multipurpose vessels with a capacity of 61,600 dwt, set for delivery in 2025–2026, to handle breakbulk and dry bulk shipments like rare earths and minerals.